BlogLatest NewsThe end of company cars?

The end of company cars?

With the government consistently increasing the rate of company car tax, whether its a low emissions or high emissions vehicle it just doesn’t look like its worth while anymore.

We’ve now got tax figures through to 2018/19 as the government announce them early and then legislate the following year.

What’s going to happen is that tax on company cars is set to rise really quite markedly over the next few years. Oddly, it’s perverse, but almost the worst to lose out from it are people who have gone for a low emissions car.  Lets look at a few examples:

A Smart car, which has a conventional engine with quite low emissions.  It emits 82 grams CO2 per kilometre and is currently taxed at 11.5% of list price.  It’s a moderately cheap car to buy brand new and so is fairly good value currently but by the end of the period we’ve got figures for it will be taxed at 19% of list, meaning the benefit in kind is set to almost double,

What about a Nissan Leaf, which is a fully electric car.  As a company car if you’re doing a lot of miles, then it’s got some major limitations because the range on it is not that brilliant. But despite a £5,000 government grant towards buying one, the other downside is electric cars are so much more expensive and you are taxed on the full list price.  At the moment there is zero benefit in kind, but by 2018/19 it will shoot up to 11% of the orginal list price.

The Vauxhall Ampera, a popular fleet car, which is a very efficient hybrid that only emits about 30 grams CO2 per kilometre. Again it has a high list price, but the benefit in kind is basically shooting up in the coming years.  Perversely the only people who are not seeing huge rises in their tax bills having a company car are those people who have got a big car, such as a Range Rover.  Alright they are paying a lot of tax currently, but theirs isn’t going up, because they’re off the top of the scale already,

So what can you do?

For the occasional business driver the use of the governments approved mileage rates of 45p and 25p per mile for using their own car is the only sensible option, however its a tougher decision for someone who does a lot of miles.

For someone who does a huge number of business miles, the 45p a mile plus 25p after 10,000 isn’t really going to cover the business motoring costs because of the depreciation on the car.  If they buy their own car to do that in, they’re going to lose money hand over fist. But to have a company car they will pay so much tax that you sort of wonder what’s the home for them? They’ve lost out and all they do is drive for work.

The answer, reluctantly, is probably a van.

The benefit in kind for that is only just over £3,000 and if they are doing silly miles, i.e. doing 50,000-60,000 miles a year, then leasing is out so you’re not left with a lot of choice. It’s those drivers that really lose out, because they don’t really have a natural home and probably a van is the only thing for them,

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